China keeps lending rates unchanged for 7th straight month

China keeps lending rates unchanged for 7th straight month

SHANGHAIChina kept its benchmark lending rates unchanged for the seventh month in March, as expected, after the central bank surprised markets last week by moving to lower the amount of cash banks must set aside as reserves.

Market watchers believe that the need for more imminent monetary easing has been reduced after the People's Bank of China PBOC said on March 17 it would cut the reserve requirement ratio RRR. On Monday, the one-year loan prime rate LPR was kept at 3.65 per cent, while the five-year LPR was unchanged at 4.30 per cent.

In a Reuters poll conducted last week, all 22 participants predicted no change to either rate. Such unanimity has been rare in previous surveys.

Last week, the PBOC ramped up medium-term liquidity injections when rolling over maturing policy loans, but kept the interest rate unchanged. The MLF rate, the medium-term lending facility, serves as a guide to changes in the LPR.

18 designated commercial banks submit proposals to the central bank every month to set the LPR, which banks normally charge their best clients.

In August, China cut both LPRs to boost the economy.